MARKETS | Staff Reporter, Malaysia

APAC banks paid $5.1b in fines for money laundering breaches in 2020

The 1MBD scandal saw Malaysia to issue fines worth $3.9b.

Banks in Asia-Pacific (APAC) have paid a total of $5.1b in fines for money laundering-related breaches in 2020, a "dramatic" increase from 2019’s $6.6m, according to a study by financial technology solutions provider Fenergo.

Regulators in APAC, including the Malaysia Securities Commission and AUSTRAC in Australia, were amongst those handing out the biggest enforcement actions to banks involved in the 1MBD scandal and the Australian bank embroiled in a high-profile money laundering scandal. A total of $3.9b in fines were issued by Malaysia alone.

Notably, major Australian bank Westpac was fined around $980m (A$1.3b) last September for its money laundering scandal with links to serious crimes

This year also saw a landmark action taken against Goldman Sachs totalling $6.8 billion from multiple regulators for its involvement in 1MBD scandal – including the second biggest enforcement action imposed against one bank since 2015, noted Fenergo.

“2015 was a record year for enforcement actions but 2020 has the potential to match or top that year’s total if significant investigations are concluded by the end of the calendar year,” says Rachel Woolley, global director of financial crime, Fenergo.

Woolly noted two notable shifts in imposing penalties. First, APAC has overtaken the US in terms of the value of enforcement actions for the first time since 2015. This was reportedly driven by recent FATF activity and the repercussions of the 1MDB scandal. Second, there has been an increased focus on individuals being penalised than we have seen in previous years, notes Woolley.

In addition to imposing penalties on financial institutions, regulators and authorities in China, the UK and the US have held individuals accountable for compliance failings.

“Whilst banks may hold reserves explicitly to settle enforcement actions, individuals will suffer a far greater personal impact. This along with greater whistleblowing protection and incentives will make a difference in tackling the industry-wide issue of financial crime,” Woolley adds.

More breaches fined
Year to date, Fenergo reports that penalties have totalled $10.4b for non-compliance with Anti-Money Laundering (AML), Know your Customer, data privacy, and MiFID (Markets in Financial Instruments Directive) regulations.

Volume-wise, a total of 198 fines have been levied to financial institutions for these breaches, a 141% YoY higher than in 2019.

Outside of APAC, the U.S. Department of Justice has issued enforcement actions totalling more than $1.92b to Goldman Sachs, Bank Hapoalim and Union Bancaire Privée.

Collectively, financial institutions headquartered in the US received the highest value of fines, accounting for almost $7.49b. The fines levied towards Goldman Sachs accounted for 91% of the US total. 

Meanwhile, 203 individuals were fined $88.8m for AML and MiFID breaches in US, Europe, and China.

The average value of enforcement actions against global financial institutions for AML related compliance breaches is 44% lower than in 2019.

($1 = A$1.32)

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